The most comprehensive educational resources for finance

Book Review: Damodaran on Valuation: Security Analysis for Investment and Corporate Finance

Ashwath Damodaran’s Damodaran on Valuation: Security Analysis for Investment and Corporate Finance is a book that must be on the bookshelf of every serious student and practitioner of valuation. This three-part book concentrates on discounted cash flow and relative valuation models in it’s first two parts. The third part concentrates on topics that get short

Choosing the Right KPIs for your Business Dashboards

A Key Performance Indicator (KPI) is a business metric that demonstrates how effectively your business is doing in achieving its goals. These are the metrics used by the company management to manage its operations and growth. Key performance indicators means factors by reference to which the development, performance or position of the business of the

eBook – Introduction to Corporate Finance

We are glad to announce that our new ebook “Introduction to Corporate Finance” is now available on Amazon Kindle Stores. This Kindle ebook introduces the reader to the world of corporate finance and teaches the fundamentals of how corporates make their investing and financing decisions. You will learn about the process of capital budgeting, i.e.,

Degree of Total Leverage

Using the formulas for Degree of Operating Leverage (DOL) and Degree of Financial Leverage (DFL), we can calculate the degree of total leverage (DTL) for the firm as follows: In the above formula, you can observe that if there are no fixed operating costs and fixed financing costs, there is no leverage, and DTL will

Degree of Financial Leverage

Financial leverage arises when a firm has fixed financing costs in its income stream. The presence of financial leverage magnifies the effects of changes in sales to the firm’s net earnings. Sources of financial leverage are primarily debt and preferred stock. The British expression for financial leverage is gearing. The degree of financial leverage is

How to Calculate Degree of Operating Leverage

Operating leverage arises when a firm has fixed operating costs in its income stream. The presence of operating leverage magnifies the effects of changes in sales to the firm’s operating earnings, i.e., a change in the volume of sales results in a “more than proportional” change in operating profit (or loss). The degree of operating

Calculating Profitability Index in Excel

Profitability index is an important measure in project finance to decide whether to invest in a project or not. It is calculated as the ratio of present value of a project cash flows and the initial investment. If the profitability index is greater than 1, the project is accepted, and if it is less than

Problems with Calculating WACC

The weighted average cost of capital (WACC) is the cost of capital a company expects to pay to all its stakeholders including equity and debt-holders. First we calculate the marginal cost of capital for each source of capital such as equity and debt, and then take the weighted average of these costs. While calculating the

5 Different Corporate Finance Ideas for Your Business

When running a business, profit and cashflow are two important factors. While you can’t take full control, you can have some influence over them. Here are five ideas to take more control over your business finances and improve your cashflow and profit each year. Reduce Your Outgoings It may sound obvious that to increase your

Why Do Firms Issue Bonds Abroad?

Corporate bond issuers in emerging economies in Asia have often had a choice between an onshore market and an offshore one. Since 1998, however, many of these issuers have increasingly turned to the onshore market. This paper provides lessons from onshore and offshore corporate bond finance in Asian emerging markets. It investigates systematically what factors